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U.S. dollar down 0.3%
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Markets pricing in Fed's 25-bps rate hike in May
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Palladium rises about 5%
(Updates prices)
By Deep Kaushik Vakil
April 18 (Reuters) - Gold prices clawed their way back
above the key $2,000 level on Tuesday as the dollar and bond
yields retreated, with investors weighing whether the U.S.
Federal Reserve will pause its interest rate hike cycle after
the May meeting.
Spot gold was up 0.5% at $2,005.41 per ounce by 1:41
p.m. EDT (17:41 GMT), after hitting a two-week low of $1,981.19
in the previous session. U.S. gold futures settled 0.6%
higher at $2,019.70.
The dollar index fell 0.3% following data that showed
China's economy grew at a faster-than-expected pace in the first
quarter, making greenback-priced bullion more attractive to
overseas buyers, while benchmark U.S. Treasury yields dipped. "What gold traders really care about is how fast do we get
the (rate) cuts. The market has already priced for cutting cycle
to begin even as early as this summer," said Daniel Ghali,
commodity strategist at TD Securities.
Markets were pricing in an 86% chance of a 25-basis-point
rate hike at the Fed's May 2-3 meeting, and odds of 71% for a
pause in June.
Higher interest rates to combat rising prices tend to lower
demand for gold, countering its customary role as an inflation
hedge.
St. Louis Fed President James Bullard said the Fed should
continue raising rates as recent data shows inflation remains
persistent, while Atlanta Fed President Raphael Bostic said the
Fed will likely need to hold steady for an extended period to
lower inflation after one more rate hikes.
Markets will focus on more comments from Fed officials this
week before they enter a blackout period from April 22, ahead of
the May meeting.
Palladium rallied 4.6% to $1,631.84 per ounce, its
highest in more than two months, while platinum gained
3.2% to a three-month high of $1,081.18.
"Platinum, but to a lesser extent palladium, have been
benefiting from the power outages in South Africa, which is a
significant supply shock," Ghali said.
Spot silver rose 0.3% to $25.17.
(Reporting by Deep Vakil in Bengaluru; Editing by Sherry
Jacob-Phillips and Shounak Dasgupta)
